IRS Says Services Not Sourced to US Parent on Foreign Tax Credit

The activities of a US company’s foreign subsidiary shouldn’t be attributed to the US parent in sourcing its services income for purposes of determining limitations on its use of the foreign tax credit, the IRS says.

The service activities can’t be attributed to the US parent in the sourcing process for its services income under Section 861 and the determination of its gross income within the separate limitation categories of Section 904(d), the IRS said in a memorandum released Friday. Section 904 limits the total amount of the Section 901 foreign ...